• Stocks close mostly lower to begin the week – North American equity markets closed mostly lower on Monday, following domestic inflation data for July that showed consumer prices rose by 3% on an annual basis, up from the prior month's reading of 2.8%. Overseas, European markets were little changed, while Asian markets were mostly higher overnight despite weaker-than-expected second-quarter GDP growth in Japan. Government bond yields finished the day higher, with the 10-year GoC yield rising to 3.72%. South of the border, the 10-year U.S. Treasury yield finished just above the 4.7% mark, while the 30-year yield rose to 5.31%, the highest since 2007. In commodity markets, oil prices also finished higher, with West Texas Intermediate crude trading around $84 per barrel as investors continued to monitor developments in the Middle East.
   
• Headline inflation rises in July, but core measures remain contained – The domestic headline consumer price index (CPI) rose 3.0% year-over-year in July, accelerating from a 2.8% increase in June. Higher gasoline prices were a key contributor, rising 25.7% from a year earlier as conflict in the Middle East placed upward pressure on energy prices. Prices for travel tours and air transportation also increased, perhaps reflecting a temporary boost in travel demand related to the World Cup. In our view, these travel-related increases are unlikely to be repeated to the same extent in the coming months. Beneath the headline reading, inflation pressures appeared relatively contained. The Bank of Canada’s preferred measures of core inflation, CPI-median and CPI-trim, rose 2.0% and 1.9%, respectively, from a year earlier. In our view, both measures remaining near the midpoint of the Bank’s 1% to 3% inflation-target range suggests that underlying inflation pressures remain manageable. With underlying inflation contained, we expect the Bank of Canada to remain on hold in the near term.
   
• U.S. bond yields remain near year-to-date highs despite tame July inflation – Last week brought encouraging news on the U.S. inflation front, with both headline and core CPI moderating and wholesale prices trending lower. In response, futures markets shifted from pricing in a rate hike at the Federal Reserve’s September meeting to favouring a hold. Bond yields, however, have traded higher, with the 10-year U.S. Treasury yield above 4.7% today and the 30-year yield rising to 5.31%, the highest since 2007. In our view, several factors are likely contributing to the upward pressure in longer-term yields. First, issuance of U.S. investment-grade corporate bonds has increased meaningfully this year. Bloomberg has noted that issuance is more than 30% higher on a year-over-year basis, suggesting that greater supply may also be contributing to the elevated yield environment. Second, oil prices continued to move higher amid uncertainty surrounding the path forward in the Middle East, adding to inflation concerns and potentially placing further upward pressure on bond yields. Finally, ongoing U.S. fiscal concerns have likely placed upward pressure on yields, particularly at longer maturities. The U.S. reported a $432 billion budget deficit for July, the largest monthly shortfall since March 2021. Against this backdrop, we expect the 10-year Treasury yield to trade within a range of 4.5% to 5.0% over the remainder of the year. Looking beyond the near term, starting yields have historically had a strong relationship with future returns for investment-grade bonds over a multi-year time horizon. Geopolitical uncertainty, elevated issuance, and fiscal concerns may continue to create challenges, but today’s higher yields could bode well for U.S. fixed income returns over the longer run, in our view.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.}

• Stocks close slightly lower, with U.S. household spending in focus – North American equity markets closed slightly lower on Friday following softer-than-expected U.S. economic data. U.S. headline retail sales fell 0.6% in July, compared with expectations for a 0.1% gain. Meanwhile, the preliminary University of Michigan Consumer Sentiment Index declined to 51.0 in August from 55.2 in July, remaining well below its longer-term average of around 84. Despite Friday’s decline, the TSX and S&P 500 each finished modestly higher for the week. Bond yields also moved higher, particularly at the long end of the curve. The 10-year GoC yield climbed to just below 3.7%, while the 10-year U.S. Treasury yield rose to approximately 4.69%. The rise in longer-term yields despite softer economic data may reflect several factors, including ongoing uncertainty surrounding developments in the Middle East and a modest increase in U.S. consumers’ year-ahead inflation expectations. The University of Michigan survey showed that year-ahead inflation expectations edged up to 4.3% in August from 4.2% in July, while five- to 10-year expectations held steady at 3.3%.
   
• U.S. consumer spending softens in July – U.S. headline retail sales fell 0.6% in July, missing expectations for a 0.1% gain and posting their first monthly decline since January. Despite the monthly pullback, sales remained 5.0% higher compared to this time last year. Looking beneath the headline, declines at motor vehicle and parts dealers and gasoline stations weighed on July sales. However, weakness extended beyond these categories, as retail sales excluding motor vehicles, parts, and gasoline also declined 0.2% for the month. A 2.2% decline in sales at nonstore retailers, a category that includes online shopping, contributed to the broader weakness. However, the drop may partly reflect a timing distortion, as Amazon moved Prime Day from its traditional July window to June 23–26 this year, potentially pulling some purchases forward into June. In our view, elevated tax refunds stemming from legislation enacted in 2025 likely supported U.S. consumers during the first half of the year. Combined with relatively stable labour-market conditions and a low pace of layoffs, this support likely helped offset the pressure that higher energy prices placed on household finances. With the boost from tax refunds likely behind us, a more moderate pace of spending appears reasonable to us over the second half of the year. Nevertheless, we expect U.S. consumer spending to remain stable through year-end, supported by healthy household balance sheets and low unemployment.
   
• Contained U.S. inflation supports a Fed pause in September – Markets breathed a sigh of relief this week as July’s consumer price index (CPI) and producer price index (PPI) inflation reports came in largely in line with, or below, expectations. On the consumer side, headline CPI rose a modest 0.1% for the month and eased to 3.4% on a year-over-year basis. Core CPI increased 0.2% in July and 2.5% from a year earlier. Over the three months through July, core CPI rose at a 1.6% annualized rate, marking the first three-month reading below the Fed’s 2% inflation target this year. The producer price report provided further evidence of moderating price pressures. Headline PPI was unchanged in July, while PPI excluding food and energy rose 0.2%, below expectations. Before last week's payroll report, markets had priced in roughly a 60% probability of a 0.25-percentage-point rate increase at the Fed’s September meeting. Following this week’s inflation data, futures markets are now tilted toward a pause, with the probability of a rate increase falling to approximately 30%. Barring an upside surprise in the August inflation data or renewed energy-price pressures, we believe the recent string of moderate inflation readings support the Fed holding rates steady in September.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.}

• U.S. stocks continue to set record highs – U.S. and Canadian equity markets moved higher on Thursday, with the S&P 500 hitting a new record high. This comes as both U.S. consumer price index (CPI) and producer price index (PPI) inflation data for July came in somewhat cooler than expected. As a result, expectations for a Federal Reserve interest rate hike in September have moved lower. According to CME FedWatch, the probability of the Fed raising rates at the September 16 FOMC meeting has fallen to about 34%, from around 55% last week. Government bond yields in the U.S. and Canada are also moving lower, supportive of equity markets as well. The U.S. 2-year Treasury yield, which tends to be most sensitive to Fed rate expectations, moved lower by about 0.05%, from 4.2% to 4.15%. Overall, for the full year, the S&P 500 is now up about 14%, while the Canadian TSX is up by about 15%. In our view, a combination of strong earnings growth and stable labour-market and consumption trends continues to underpin stock market gains.
   
• U.S. producer price index (PPI) inflation eases in July, in line with expectations – Headline PPI inflation rose 4.7% year-over-year in July, below expectations of 4.9% and well below last month's 5.5% reading. Core PPI inflation, excluding food and energy, was up 4.2%, slightly above forecasts of 4.1%, but still below last month's 4.7%. Overall, easing inflation on producer prices indicates that production and materials costs are more contained and could mean better final prices for consumers. Markets have welcomed this week the combination of better-than-expected CPI inflation and PPI inflation for the month of July. Nonetheless, inflation remains elevated versus the Fed's 2.0% core inflation target. While inflation does not seem to be reaccelerating, which is a step in the right direction, investors will be monitoring one more set of inflation data in September, which we believe will be critical ahead of the September FOMC meeting.
   
• Investing at all-time highs can be fruitful – Reaching an all-time high can leave investors wondering whether it is still a good time to put money to work. While pullbacks can occur at any time, history suggests that new highs have not typically been poor entry points.* Average forward three-month returns have been slightly lower when investing at an all-time high, but the gap largely disappears over six months.* Over one-, three-, and five-year horizons, average returns have actually been higher following all-time highs than when investing on a typical trading day.* In our view, the lesson is that new highs often occur because fundamentals are improving, not because a market advance is ending. As a result, time in the market has historically mattered more than waiting for a perfect entry point. Read more in this week's Weekly Market Wrap: https://www.edwardjones.ca/ca-en/market-news-insights/stock-market-news/stock-market-weekly-update

Mona Mahajan;
Investment Strategy

^{Source for all data not cited: FactSet.
Source for data cited: *FactSet, Edward Jones}

• Stocks rise with U.S. inflation in focus – North American equity markets traded higher on Wednesday following the release of U.S. Consumer Price Index (CPI) data for July. Headline CPI rose 3.4% year-over-year, while core CPI increased 2.5%, with both measures matching consensus expectations. From a leadership perspective, the TSX and Nasdaq outperformed, gaining 0.6% and 0.5%, respectively, while the S&P 500 also posted a modest gain. Bond yields closed little changed following the in-line inflation reading, with the 10-year U.S. Treasury yield ending the session at approximately 4.69% while the 10-year GoC yield fell to 3.68%. In commodity markets, oil prices were little changed as investors continued to await greater clarity on the outlook for the Strait of Hormuz.
   
• U.S. inflation eases in July, matching expectations – U.S. headline CPI rose 0.1% in July and 3.4% from a year earlier, matching consensus expectations. Core CPI, which excludes food and energy, increased 0.2% for the month and 2.5% year-over-year, also in line with expectations. Encouragingly, the July reading brought the three-month annualized rate of core CPI down to 1.6%, the first reading below the Fed's 2% inflation target since December 2025. Looking at the underlying drivers, shelter inflation, which accounts for more than one-third of the CPI basket, rose a modest 0.1% for the second consecutive month. Additionally, sluggish U.S. home-price growth in recent months suggests the potential for further moderation in shelter inflation over the coming months. On the other hand, core goods prices posted their largest monthly increase since September of last year, as upward pressure on used vehicle and consumer electronics prices filtered through, with the latter perhaps reflecting recent price increases announced by Apple. Overall, we believe today's report suggests that higher oil prices have not created broad-based inflationary pressures across core categories. Combined with a contraction in payrolls in July, the data could help support a patient approach from the Federal Reserve with respect to future monetary-policy actions. That said, the August inflation report will likely play a key role in shaping expectations ahead of the September policy meeting.
   
• Consumer check-in ahead – In addition to another key inflation reading, this week will also provide a look into recent U.S. consumer-spending trends, with July retail sales scheduled for release on Friday. Expectations are for the headline figure to rise 0.1% month-over-month, while control-group retail sales, which exclude categories such as motor vehicle and parts dealers, gasoline stations, building materials, and restaurants and bars, are expected to increase 0.4%. More recently, evidence has pointed to solid consumer-spending trends. Control-group retail sales grew at a three-month annualized rate of 8.0% through June, while real personal consumption expenditures increased at a 3.2% annualized rate in the second quarter. That marked the strongest pace of growth in a year and highlighted the resilience of household spending despite higher oil prices. We expect U.S. consumer-spending trends to remain healthy in the coming months, supported by steady labour-market conditions despite slowing job growth, and generally healthy household balance sheets.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.}

• Markets close mixed ahead of this week's inflation reports – The TSX reached a new record closing high, while U.S. equity markets ended lower on Tuesday as investors look ahead to tomorrow's U.S. Consumer Price Index (CPI) report. Bond yields also declined, with the 10-year Government of Canada yield at 3.71% and the 10-year U.S. Treasury yield near 4.69%. International markets were mixed across Asia and Europe. In energy markets, WTI oil prices rebounded near $83 per barrel as markets weighed diplomatic efforts to ease disruptions in the Strait of Hormuz. The U.S. dollar was little changed against major currencies.
   
• Market focus shifts to inflation –July's U.S. CPI report will be released Wednesday, with forecasts calling for headline inflation to ease to 3.4% year-over-year, from 3.5% in June. Core CPI, which excludes the more volatile food and energy components, is forecast to cool to 2.5%, down from 2.6%. The July Producer Price Index (PPI) report, due Thursday, is expected to show a more pronounced slowdown in wholesale inflation, although from a higher starting point. A broadly in-line or softer set of readings should help reinforce the view that inflationary pressures are gradually moderating and could give the Fed greater flexibility in setting monetary policy. Conversely, an upside surprise, particularly in core inflation, could challenge that narrative and put upward pressure on bond yields.
   
• Employment data points to slower job growth – U.S. private employers added an average of 8,250 jobs per week for the four weeks ending July 25, down from 11,000 in the previous report, according to ADP. The figures are consistent with other indicators pointing to moderation in hiring. Even at this slower pace, job gains may be sufficient to support near-full employment, particularly as labour-force growth also slows. The broader labour market therefore appears to be cooling but still roughly balanced, in our view. Approximately 7.4 million job openings continue to exceed the 6.9 million unemployed workers, suggesting labour demand remains relatively healthy. This should help support household incomes and consumer spending, key pillars of the broader economy. At the same time, slower hiring should help reduce wage-related inflation pressures, potentially giving the Fed more room to be patient. The timing of any move will likely depend on incoming inflation and employment data over the months ahead. We also expect the Bank of Canada to remain on hold a while longer.

Brian Therien, CFA;
Investment Strategy

^{Source for all data: FactSet.}